HCM 416 EXAM QUESTIONS AND ANSWERS WITH COMPLETE
SOLUTIONS
What are the 4 finance activities? (i.e the 4 C's)
Cost minimization
Cash sufficiency
Capital access
Control
4 major categories of business organizations
Proprietorship
Partnership
Corporation
Hybrid forms
Advantages of proprietorships/partnerships
Ease of formation
Subject to few regulations
No corporate income taxes
Disadvantages of proprietorships/partnerships
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
, Advantages of corporations
Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital
Disadvantages of corporations
Cost of formation and reporting
Double (or triple) taxation for investor-
owned corporations
S corporations
corporations with a limited number of stockholders that is taxed as a proprietorship or
partnership
gatekeeper physicians
must authorize any specialized or referral services using: utilization review to ensure
that services rendered are appropriate and needed, discounted rate schedules for
providers, and payment methods that transfer some risk to providers. This allows them
to limit patients to particular providers
Capitation
most risky form of reimbursement methods! based on the number of covered lives as
opposed to the amount of services provided
Fee-for-service
reimbursement methodology that provides payment each time a service is provided
cost-based reimbursement
SOLUTIONS
What are the 4 finance activities? (i.e the 4 C's)
Cost minimization
Cash sufficiency
Capital access
Control
4 major categories of business organizations
Proprietorship
Partnership
Corporation
Hybrid forms
Advantages of proprietorships/partnerships
Ease of formation
Subject to few regulations
No corporate income taxes
Disadvantages of proprietorships/partnerships
Limited life
Difficult to transfer ownership
Unlimited liability
Difficult to raise capital
, Advantages of corporations
Unlimited life
Easy transfer of ownership
Limited liability
Ease of raising capital
Disadvantages of corporations
Cost of formation and reporting
Double (or triple) taxation for investor-
owned corporations
S corporations
corporations with a limited number of stockholders that is taxed as a proprietorship or
partnership
gatekeeper physicians
must authorize any specialized or referral services using: utilization review to ensure
that services rendered are appropriate and needed, discounted rate schedules for
providers, and payment methods that transfer some risk to providers. This allows them
to limit patients to particular providers
Capitation
most risky form of reimbursement methods! based on the number of covered lives as
opposed to the amount of services provided
Fee-for-service
reimbursement methodology that provides payment each time a service is provided
cost-based reimbursement
